Head of the Holiday Inn hotel chain Kevin Kowalski stands next to the streamlined new logo at a Holiday Inn in New York. Photograph: Dan Callister/Dan Callister

As American as bluegrass music or faded denim, the friendly green lights of Holiday Inns have greeted weary travellers on highways and byways for five decades. A neon-lit lobby, a blandly adequate room, pay-per-view movies and a buffet breakfast beckon.

But changes are afoot at the world's largest hotel brand. Holiday Inn's 3,300 properties across the globe are getting a $1bn (£600m) facelift, officially launched in New York this week. Battling ruthless mid-market competition, Holiday Inn is sharpening its act with a swish new logo, revamped public spaces, landscaping, better bedding and even a standardised scents.

"We've got one of the iconic brands of the world," says Kevin Kowalski, a former Coca-Cola marketing executive and global head of the chain. "We want to make sure it's fresh and current and relevant for today's traveller."

Founded with a single hotel in Memphis in 1952, Holiday Inn was the brainchild of Kemmons Wilson, an American entrepreneur who became frustrated on a family road trip at the gap between shoddy roadside motels and fussy, pricey posher establishments. The chain has crept around the world with properties in nearly 100 countries, most recently opening in Vietnam and the Maldives.

The Holiday Inn name has been immortalised in songs by the likes of Elton John, Robbie Williams and Snoop Dogg. But for all its American roots, the chain has been in British hands since 1990, owned by InterContinental Hotels, based in Buckinghamshire.

Run by local franchisees, Holiday Inn outlets will be obliged to spend an average of $100,000 to $200,000 per property on improvements. There will be new lighting, signature plant pots and a choice of soft or hard pillows in every room. Power showers will abound and staff are having friendliness drummed into them.

Properties unable, or unwilling, to smarten up will lose the Holiday Inn brand. Kowalski says the chain has lopped 130 properties off its estate each year for the past three years. Older hotels with, for example, motel-style exterior corridors, face the axe.

"If they're not up to standard, we don't want them in the system," says Kowalski.

It isn't hard to spot the rationale for a relaunch. Upmarket hotel chains are making incursions into Holiday Inn's territory. No-frills offerings such as Marriott Courtyard, Hilton Garden Inn and Hyatt Place have taken root across the US over the past decade and are just beginning to appear in the UK.

And the recession has taken its toll – Holiday Inn's occupancy rate was 54% in the US and 61% in Europe during the first half of the year, leaving four out of 10 rooms sitting empty. Revenue per available room fell 17% to $51 in the US and slipped by 16% to $66 in Europe.

Critics say Holiday Inn has a staleness, characterised by big, square, unattractive box-style buildings, lifeless restaurants and dull decor. Bjorn Hanson, a hospitality expert at New York University, says the chain's sheer scale has left it less nimble than its rivals. "As times change and preferences change, it's really hard to say to hundreds of different owners 'we need you to re-design your buildings and change the way you operate'," he said.

Under pressure, Holiday Inn's response is greater standardisation. Every hotel will be obliged to plug in a lobby "scent machine". A mélange of ginger, white tea, citrus and musk will be pumped out at full-scale Holiday Inns, and sweet grass and green tea at cheaper Holiday Inn Express sites.

And a global playlist of 1,000 soundtracks will greet guests, ranging from Sting to John Mayer and the Jackson Five. A few local variations are allowed – in France, for example, Carla Bruni makes the cut, while Kylie Minogue will play in Britain.

Experts say that reliability and uniformity remain appealing to routine business travellers, particularly in the US, who simply want a hassle-free place for a night's rest.

"It's rather like Coca-Cola. You just want to ensure that every time you open a bottle, if it's in the classic Coke bottle, it's going to be the same," says Robert Barnard, director of hotel consultancy at the advisory firm PKF in London. "The lodging industry in the States caters for a lot of people out on the road, sales executives travelling, and the brand promises they'll have the same experience every time they stop."

Holiday Inn is hardly alone in facing a tightening market. Figures from PricewaterhouseCoopers suggest the chain is performing no worse than its peers, perhaps benefiting from austere economic conditions in certain locations, as customers "trade down" from more expensive hotels. PWC predicts that industry-wide revenue per room will drop by 16% for the US this year and average occupancy will fall from 60% in 2008 to 55% for 2009.

"It was not a major red flag or a call to action around cracks showing," says Kowalski. "It was more of a desire to maintain leadership." He is mildly derisive of the likes of Marriott and Hilton, describing their hotels as "stiff, formal corporate spaces" in comparison to Holiday Inn's more leisurely ambience.

"We're casual, unpretentious. We're the polar opposite of those brands. At a Holiday Inn, you want the opportunity to switch off, get away from your work persona and your work life," he says.

But Kowalski is a shade defensive: "We were really the first major player in this space and we essentially define the category. This is about making sure we continue to be a leader and making sure the upstarts don't take too much of our market."